Published in · 6 min read · Aug 6, 2018
I remember the first time I entered a Trader Joe’s store 4 years ago, it took me by surprise. If I were to sum up my first impressions of Trader Joe’s it would be the following four C’s: compact, convenient, cost-effective, and cordial.
I was amazed by how a grocery store with so little square footage can contain fresh produce, snacks, and many other items at such ridiculously affordable price points in a welcoming atmosphere. It was quite the opposite experience from what I was accustomed to at a Safeway grocery store as well as the high-end Whole Foods, a direct competitor to Trader Joe’s.
With revenue at around $13.3 Billion as of the 2017 fiscal year, 474 stores across the nation and a growing, passionate customer base, Trader Joe’s has a lot going for it. So why is Trader Joe’s so successful as a brand despite being radically different from other big chain grocery stores? The reason — it is all deliberately done by design.
The average size of a Trader Joe’s store is around 15,000 sq ft, roughly a third of the size of your typical grocery store. Yet despite this, the customer journey within the store is akin with the typical grocery shopping pattern: start from the right, greetings from flowers and fresh produce, milk at the very back, to name a few. To understand why Trader Joe’s stores have small square footage, you need to look at its origin story.
Before Trader Joe’s was conceived, the original founder and CEO, Joe Coloumbe, was running a convenience store chain called Pronto Markets back in the 1950s-1960s in Southern California. However, with fear of not being able to compete with the formidable force of 7-Eleven, Joe felt that he needed to pivot to a different direction with his stores.
It was during that time that he noticed a need; young people with wanderlust who were dissatisfied with the lack of exotic food offerings at large supermarkets. With this in mind a product-market fit was found: young, highly educated middle class people who wanted to get great quality, exotic foods at affordable prices.
This need coupled with the current size of his convenience stores formed an interesting amalgamation — a grocery store that offers high quality foods in a convenience store-like setting. While seemingly a weird combination on paper, this resulted in an expedient and pleasant grocery shopping experience that also saves the company money on store space.
The size of the store isn’t the only thing that defines the Trader Joe’s experience. The brand and how the store portrays itself is also critical in creating such a positive experience.Trader Joe’s tagline is “your neighborhood grocery store,” a phrase that is reflective of its store environment. To accomplish this, it uses one of Robert Cialdini’s principles of persuasion: liking.
When a customer walks into the store, they are greeted by murals on the wall that show landmarks of their respective hometown. Cialdini’s liking principle states that people tend to connect with others who share similar commonalities, whether it be cultures, interests, etc. In the case of Trader Joe’s, the murals capture the uniqueness of a customer’s city, making them feel like the store is fitting right in with the neighborhood.
Trader Joe’s takes it a step further with the liking principle in how they frame their prices. Trader Joe’s is known for being very affordable and the way they frame it is as follows: “…every penny we save is a penny you save.” This sort of phrasing makes the customer and seller feel like equals.
In other words, you don’t feel like you are just shopping at any grocery store, but rather your neighbor’s store who provides you all the necessities to the best of their ability at a price that is quite generous. The more people feel that they are relatable with one another, the more empathetic their actions are, and that’s exactly what Trader Joe’s does in their store environment and pricing strategy.
Trader Joe’s store size and friendly atmosphere are only scratching the surface of how it differentiates itself from other grocery stores. It is also the number of stock-keeping units (SKUs) that really makes Trader Joe’s stand out. Trader Joe’s hold around 4,000 SKUs compared to the average grocery store, which as of 2016 holds around an average of 38,900 SKUs. In addition, 80% of their items are their in store brands. This may make Trader Joe’s seem to be at a disadvantage with seemingly small amount of choices, but it is actually the quite the opposite.
In a 2014 survey conducted by real estate investment firm, JLL, Trader Joe’s sold $1,734 items per square foot in contrast to Whole Foods $930 items per square foot. It may seem counterintuitive that a store with less items would sell more, however, some consumer psychological studies have shown that in many cases people are much happier when they have less choices than more.
For instance, a famous study conducted by Sheena Iyengar and Mark Lepper on jams in an upscale grocery store showed that 30% of jam purchases were made with limited options of 6 jams compared to 3% of purchases made with a large selection of 24 jams, suggesting that making the number of choices easier for the customer to process makes a big difference in the shopping experience.
Trader Joe’s acknowledges that they only sell items that are easily negotiable with their vendor to get the most cost-effective price for their customers. While this results in a smaller selection of items, the items they do sell are cherished by their customers. If anything, less items makes it easier to remember stand out items like Almond Butter.
Alan Cooper once quoted that “if you design for everyone, you delight no one…” and Trader Joe’s definitely understands that as a grocery store. Customers are aware that Trader Joe’s doesn’t offer nearly everything that a regular grocery store does, and that is absolutely ok. The trade off here (no pun intended) is that what it offers is of great value to their target shoppers needs and that the passion their customers have for their store is contagious and will bring in more customers through word of mouth and demand for more stores. This is the power of customer centered design.
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Special Thanks to ProjectUX for allowing me to serve as a guest writer
Ahlburn, A., McDonough, K. (2014, September). Out With The Old, In With The New. JLL Retail Shop Topic. Retrieved from http://www.us.jll.com/united-states/en-us/Research/JLL-ShopTopic-Grocery-share.pdf?715e0e88-2c50-49df-8839-d50262c6066a
Cialdini, R.B. (1984). Influence: The Psychology Of Persuasion. New York, NY: Harper Business.
Iyengar, S. Lepper, M. (2000, June 16th). When Choice Is Demotivating: Can One Desire Too Much Of A Good Thing?. Journal Of Personality And Social Psychology, 79, 995–1006.
Lutz, Ashley. (2014, October 7th). How Trader Joe’s Sells Twice As Much As Whole Foods. Business Insider. Retrieved from https://www.businessinsider.com/trader-joes-sales-strategy-2014-10
Schwartz, B. (2006, June). More Isn’t Always Better. Harvard Business Review. Retrieved from https://hbr.org/2006/06/more-isnt-always-better
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Understanding Trader Joe’s. (2006, May). Coriolis Research. Retrieved from http://www.coriolisresearch.com/pdfs/coriolis_understanding_trader_joes_final.pdf
